Ohio Pharmacies Face Severe Medicaid Cuts

Dispensing fees paid to Ohio pharmacies under the Medicaid program are currently among the lowest in the nation and well below the actual cost of dispensing. This fall the state filed a state plan amendment with the U.S. Centers for Medicare and Medicaid Services (CMS) in an effort to further cut dispensing fees in 2010 – from $3.70 to $1.80.

By contrast, the average Medicaid dispensing fee is $5.02, an NCPA analysis found, and the average cost of dispensing is $11.01, according to the 2009 NCPA Digest, sponsored by Cardinal Health.

Independent community pharmacies are often in underserved urban and rural areas, where they care for a high rate of Medicaid recipients. Many people are surprised to learn that independents derive, on average, 15.5% of their total revenue from Medicaid and the vast majority of overall revenue from prescription claims generally. So cuts such as these would hit the 607 independents in Ohio disproportionately hard.

Today NCPA wrote to CMS to urge the agency to reject Ohio’s state plan amendment. Our letter, available here, articulates three critiques of the state’s approach:

First, the cuts would force some independent community pharmacies with a high volume of Medicaid patients to close their doors.

Second, the resulting pharmacy closures would compromise beneficiary access to care to levels that could trigger a violation of the Medicaid Act under 42 U.S.C. 1396a(30)(A).

Third, this could lead to an increased need for other more costly health care services, such as emergency room admissions, at significant cost to the state.

Clearly, economic and budgetary times are tough, particularly in Ohio. And a similar debate is playing out in Washington and in state capitals around the country.

But, as we wrote in today’s letter, “independent community pharmacies can help reduce health care costs by promoting the optimal use of prescription drugs and counseling beneficiaries to remain adherent to their drug regimens. These actions alone can reduce the number of hospitalizations and emergency room visits that are ultimately more costly to the Medicaid system than pharmacy reimbursement.”

An economic analysis of the impact of independent community pharmacy has in Ohio is available here.